What would we do without Washington

AT&T pointed out that it would need to pause on $18 billion of fiber it intended to lay next year, while the FCC figures out whether it wants to demonize Internet profits to make the President happy. This provoked cries of "extortion," which is what we call it when someone says he's not going to provide a valuable service unless he's got a pretty good idea he can do it at a profit.

Only in Washington could a delay to seek regulatory clarity before spending $18 billion in shareholder money be called extortion. Even after six years of slow growth, the Obama crowd hasn’t figured out that punitive regulation reduces the incentive to invest.

Well, we'll just force them to invest! And if that doesn't work, we'll confiscate their money and let the public sector do a great job instead, with their proven track record of achieving miracles by avoiding the evil profit motive, which is how socialist countries get so rich and ensure that all their citizens have a decent standard of living.

16 comments:

We'd be happy to do without the delay, if only you'd do without the proposed regulation.

A major talking point among my left-leaning friends lately has been this idea that the internet works much better in nations (especially Europe and Japan) where it is government-controlled. So they really do believe that if the government takes it over and runs it, it will be both:

1) Improved in quality, and,

2) More free.

Are they right about that? Well, government can compel investments in things like infrastructure; and it is at least potentially possible for government to be so devoted to freedom and liberty that it crafts its laws in such a way as to protect those things above all. That, in fact, is exactly how the American government was supposed to work.

Ok, I'll take up this one (sort of). But to open, I don't blame AT&T in the least. It's their money, if they want to see what the market is going to be like before they spend it, good for them. I do not believe they're under any kind of obligation to drop $18, much less $18,000,000,000 without knowing if they'll be able to make that money back. I'm in 100% agreement here.

BUT... that said, let's talk Net Neutrality here for a moment. I have seen this cast in a huge number of ways intended to stir partisan feelings one way or the other. Let's start with the basic premise.

As of this moment, when you pull up a website, regardless of what the website is, you get your data back from the hosting server at whatever maximum data rate is available as determined by the speed of the connection at the host server as well as the speed of the connection at your location (based upon data rates from your Internet Service Provider, aka ISP). So if the connection is slow at your end, but fast at the host server's end, then the absolute speed at which you get CNN.com or grimbeorn.blogspot.com is whatever data rate your ISP is limited at.

So far so good. But, the ISPs also tend to be cable and entertainment companies who are currently losing a LOT of business to streamed video such as Amazon, Hulu, and Netflix. As such, they would very much like to charge customers more to visit those sites to make up for their lost revenue. Comcast already tried this once with Netflix and took enough heat they've temporarily backed down. But do not doubt, they want to try again. So, that said, how can they hurt the competition without blatantly charging their customers more? By throttling those data transfer rates. The ISPs are claiming that they need to manage their bandwidth better by limiting transfer rates on streaming services (i.e. your Netflix, Hulu, etc). The fact that this directly impacts their #1 source of competition is totally incidental, right?

So what their plan entails is that if you go to "approved" sites (like say... comcast.net) you'll get the full transfer rates that you're currently paying for. But if you want to go somewhere they'd rather you didn't, they want to be able to slow the transfer rates down (which can, and likely would destroy the streaming video businesses). And the real fear is, this is only the beginning.

Imagine in the future, if the president of Viacom (parent company to Comcast) decides that all this right-wing stuff is for the birds. Well, the solution is easy enough... throttle back the transfer rates on those sites. Sure, if someone really wants to, they could change ISPs (assuming that another internet vendor is available in their area, which is not always a given), but who's to say that other company isn't doing the same thing?

What the objective of Net Neutrality entails is the idea that regardless of what website you go to, the ISP must give the full bandwidth that you are paying them for. That they treat all websites neutrally. That's it. If you're using AT&T DSL, they don't want to allow AT&T to all but block access to Verizon's website.

Now, that said, yes, this would require government regulation. And remember, I'm definitely in the "the government that rules the least rules best" camp. And I'm still in favor of Net Neutrality. I'm not some kind of Big Government cheerleader, but the potential downside of leaving this decision in the hands of the ISPs alone, is a terrible one. And I'm also aware of the danger of the FCC deciding that some right-wing content is "hate speech" or otherwise illegitimate, but in weighing that potential risk against what I know the ISPs want this power for, I'll take the risk.

The problem is that government itself can do that just as easily as Comcast. And while the President of Comcast might possibly decide that the right-wing stuff is for the birds, he doesn't have any vested interest in doing so. Not like, say, the President of the United States. Or Lois Learner.

The risk-reward ratio is skewed- are things so broken now, that drastic government intervention is required? Was our health care so broken that the entire system had to be revised? Are we better off for the revision? In the colloquial, "if it ain't broke, don't fix it".

Agreed. But at least with the government, we have a recourse if they do so (as the midterm elections show). What are we going to do if it's our ISP that is censoring political content? They are literally unbound by the Constitution to grant or allow free speech. Private entities cannot be. And given that in many markets, your options are that one ISP or no internet at all (unless you can miraculously still find dial-up), then they still win. Either way, you're blocked from the content you wish to view.

I'm not asking for a heavy government hand with extensive regulation. I'm simply asking for a very basic rule "all internet traffic, regardless of content shall be given equal bandwidth priority".

And I'm even in favor of a bone for the ISPs. Allow them to meter bandwidth usage in the same manner as the power companies. If you only use 2GB of data a month, you are billed for 2GB of data. If you are hosting a home video streaming service and take up 100GB a month, then allow the ISPs to charge 50 times as much for that user. It is my firm belief that such metered usage/billing is inevitable anyway, and it quite literally satisfies the requirements claimed by the ISPs as well as net neutrality. You are billed for the bandwidth you use, regardless of actual content.

The risk-reward ratio is skewed- are things so broken now, that drastic government intervention is required?

The current head of the FCC (former lobbyist for Comcast, no less) agrees with you. He has determined that there is absolutely no risk in letting the ISPs determine the rules for themselves.

I for one, think that the extant risk is clear. I do this stuff for a living, and again, if I were some Big Government cheerleader, then my opinion would be immediately suspect. But again, I'm not. As Grim is aware, I'm pretty strongly conservative libertarian leaning. And when I'm saying "no, we need to have the government step in here", then maybe there's more to this than sound bites.

I take both you and the problem seriously, Mike. I'm just not sure about the solution.

One option we have if it remains private is competition -- exactly what we don't have in government! But consider that Amazon might want to have its streaming capacity unmediated by Comcast or other entertainment/cable companies. It's free to develop competitive solutions.

I realize that the single point of failure is the hard line to my house. In many cases, there's more than one option -- cable, or telephone/DSL (satellite internet sucks). Here, there's really not. So if I'm getting any streaming stuff, it's coming from Windstream, who owns the lines and can say what travels on them. Stretching more cable is extremely expensive (as from the AT&T effort with which we began).

Still, in some areas a competitive solution is readily available. In others, one could be developed if it were worth the cost to reach those markets. New technologies could be developed, too: maybe it's possible to improve satellite internet!

If the Federal government takes it over, it's going to impose one set of solutions, and it will be actually illegal to try to do anything else. The government hates competition, as the saying goes (usually beginning with, "Don't steal...").

One option we have if it remains private is competition -- exactly what we don't have in government! But consider that Amazon might want to have its streaming capacity unmediated by Comcast or other entertainment/cable companies. It's free to develop competitive solutions.

I certainly understand that Amazon or Hulu would be quite interested in figuring out how to get their product to consumers in the event that the current players shut them out of the current market. But as it stands right now, they cannot afford to expand into a market they have zero infrastructure in, nor are they (nor their investors) likely going risk throwing more money into it to build said infrastructure. More likely, they would go the way of Blockbuster (who they themselves put out of business).

Believe me, I do NOT believe in "too big to fail" nonsense. If an industry dies because it is not competitive, I believe that to be healthy for the economy. I'm not in favor of the government propping up the horse buggy whip manufacturers. But that's not what is happening here. Instead we have near monopolies (Comcast in my case, Windstream in yours) looking to crush what little competition they have, and all they require is for everyone to just look the other way for a bit. I DO believe that one of the legitimate functions of government is to prevent large scale monopolies from forming, as they distort free enterprise. The ISPs are nearing monopolistic size and scope, and while I will not accuse them of collusion to do so, I think they may have basically all come to the same conclusion as John Forbes Nash did in his modernization of Adam Smith's analysis. Namely that if everyone is making the best decisions for themselves, and none would gain anything from changing strategies, that all are best served by maintaining the status quo (http://en.wikipedia.org/wiki/Nash_equilibrium). In this particular application, it's not worth trying to break the monopoly of another company's control of an area, as their only response could be to break the monopoly control of your areas.

Still, in some areas a competitive solution is readily available. In others, one could be developed if it were worth the cost to reach those markets. New technologies could be developed, too: maybe it's possible to improve satellite internet!

One of the greatest challengers to the ISPs' control of the internet is not satellite internet (which has miserable transfer rates and even worse vulnerability to environmental interference such as storms and sunspots, but is actually the power companies. Power line communications offers the best of all possibilities for competition with the traditional cable companies. No new lines would be needed. Your house is already wired into the grid. The biggest challenges currently are both technical (the current applications are not good for long distance transmissions of signals, because it's "noisy" and gets a lot of interference with competing frequencies) and regulatory (and I'll give you one guess who is one of the primary opponents of de-regulating use of power transmission lines for TV and internet signals).

If the Federal government takes it over, it's going to impose one set of solutions, and it will be actually illegal to try to do anything else. The government hates competition, as the saying goes (usually beginning with, "Don't steal...").

As I said, it is always dangerous to give the government control of anything that is not absolutely necessary. I believe this is absolutely necessary. Why? Because this simply is not something that we can fix after the fact. If the ISPs put their major competitors out of the market, then quite literally, the last balancing factor keeping them from charging quite literally whatever they like will be gone. And the price to enter the market from scratch will be too great, even if the government steps in at a later date and says "we were wrong, net neutrality is something we would like." It would be like legislating protection for an endangered species after it's extinct.

MikeD knows a lot more about the business than I do (not saying much!), so I'll try to keep an open mind. I can see the need, sometimes, for public intervention into monopoly situations, though I'm deeply suspicious of how it works out in practice.

I'm still not going to be willing to listen to any complaints about mean companies that refuse to invest when we wish they would, nor do I favor letting the government invest when they have enough sense not to.

Generally, you're not paying for 3Mbps, your paying for 3Mbps or more, or you're paying for a best effort centered on 3Mbps, and there's often a total data transmission maximum per period (often per month). Low total use days (or you're downloading stuff of which the ISP doesn't disapprove), and you get much higher rates or a much better "best effort." High use days (or you're downloading the wrong stuff...), and you get "throttled" back to your contracted amount. Use up your total contracted data, say in the first week, and you'll get throttled for the rest of the month.